Karmaloop’s peer-to-peer marketing pays off

By Zak StamborManaging Editor

27% of the online apparel retailer’s sales stem from its representative program.

Retailers large and small are turning to Facebook and other social networks to spur sales. But few have earned a larger percentage of sales stemming from social channels than Karmaloop.com. Roughly 27% of the online apparel retailer’s sales last year came from its network of 96,500 representatives that promote Karmaloop in exchange for merchandise from the retailer.

Any consumer can sign up to be a representative on the retailer’s web site. After a rep signs up, he receives a unique promo code that he can share on social networks like Facebook and Twitter, as well as on blogs, message boards or flyers he can hand out. When a consumer enters the code on the retailer’s site he receives a 20% discount the first time he uses it and 10% off thereafter. For each purchase made using his code the rep receives points, which can be redeemed for Karmaloop merchandise.

“We’ve built our entire business on authenticity—the rep program epitomizes that notion,” says Greg Selkoe, the retailer’s CEO. That’s because while the reps receive points that are redeemable for apparel, they aren’t being paid and they aren’t constrained in how they communicate their marketing messages.

The rep program also provides a robust way for Karmaloop to reward its best supporters and brand advocates, says Selkoe. “Social networks enable people to say what they’re going to say—you can’t clamp down on people’s ideas and feelings,” he says. “But when negative feedback gets out there we often see our reps jump in to defend us.” After all, it’s in their interest to do so.

The reps can also help resolve potential issues. For instance, if a promo code isn’t working, they might be able to spot the problem—or, more likely, lead the consumer with the problem to the retailer’s customer service department.